Reacting to speculation of a significant GST (Goods and Services Tax) rate cut, Car sales in India fell sharply in August 2025 as buyers delayed purchases and dealers reduced stock orders. This anticipation of up to a 10% reduction in GST, potentially lowering prices on small vehicles, dampened the festive mood and affected market activity.
Domestic passenger vehicle (PV) sales of India’s largest carmaker – Maruti Suzuki (MSIL) – fell 8% year-on-year to 131,278 units in August 2025, down from 143,075 units in the corresponding month last year. Maruti’s entry-level mini segment (Alto, S-Presso), where chances of a GST rate cut are high, fell sharply to just 6,853 units in August 2025, a massive decline of 36% year-on-year.
The carmaker’s UV sales also dropped nearly 14% to 54,043 units in August 2025 as it is preparing for a new model launch on September 3.
Mahindra & Mahindra’s SUV sales plunged 9% y-o-y in August 2025 to 39,399 units, while Tata Motors' PV sales declined 7% to 41,001 units. Hyundai Motor India saw its domestic PV sales fall by 11% to 44,001 compared to a year ago.
“August witnessed relatively robust demand in the SUV segment amidst anticipated GST rate changes. This month, Mahindra reported 7.4% YoY growth in PV Vahan registrations,” said Nalinikanth Gollagunta, CEO, Automotive Division at M&M.
He added, “With the final GST announcement approaching, we consciously decided to bring down the wholesale billing to minimize the stock being carried by our dealers. We look forward to the GST rationalisation, which would be a demand driver through the festive season.”
India’s car market has been hit by a sudden decline in sales and enquiries after Prime Minister Narendra Modi announced next-generation GST reforms and GST rate cuts in his Independence Day speech on August 15. Buyers have started delaying their purchase in anticipation that prices of smaller cars and two-wheelers may decline up to 8-10%.
The automobile industry has urged the government to hasten the implementation of new GST rates, seeking their rollout before the start of the festive season in the second half of September.
The GST Council will meet for a two-day session starting September 3. Headed by Finance Minister Nirmala Sitharaman, the council is expected to implement the new tax slab in the next couple of weeks.
At present, vehicles are taxed under multiple slabs combining GST and cess. Small cars are taxed at 28%, whereas large cars (above 4 meters in length and 1200cc in engine size) are taxed (including cess) in the range of 43-50%. As per reports, the government is weighing a flat 18% levy on smaller cars and two-wheelers whose engine size is below 350cc. Luxury cars and sports utility vehicles are expected to fall under the higher 40% bracket.
Industry experts believe that the rate cut will provide a major boost to the small car segment, as prices in this category have increased by 50% to 80% over the past six years, making them unaffordable for many buyers.
To beat the domestic market slowdown, carmakers are expanding their global market base. Maruti Suzuki's exports jumped nearly 40% year on year to 36,538 units in August 2025 from 26,003 units a year ago while Hyundai’s exports grew by 21% to 16,500 units. Tata Motors’ export grew by a staggering 573% to 2,314 units in August 2025.